We have continued to observe a significant number of investigations and audits conducted by the Victorian State Revenue Office (SRO) in respect of payroll tax compliance.
This follows the landmark judgment which was handed down on 1 August 2025 by the New South Wales Supreme Court of Appeal (Court) in Chief Commissioner of State Revenue v Uber Australia Pty Ltd.1 In that decision, the Court held that payments made to Uber drivers constituted wages for the purpose of calculating the payroll tax liability of Uber Australia Pty Ltd (Uber).
As a consequence, Uber is now liable to pay just over $81.5 million in payroll tax for the 2015 to 2020 financial years.
Uber is now accelerating to the High Court to challenge the Court’s decision, having lodged an application seeking special leave to appeal.
The facts
Uber conducts a business structured upon a rideshare system. Under that system, riders (i.e. customers) who wish to be transported by motor vehicle are placed in contact with drivers offering the service of picking them up and driving them to their destination. This connection is achieved via Uber’s two software applications or ‘apps’ (the Driver App and the Rider App).
Central to the business is the collection of money directly from riders electronically at the end of each trip, of which Uber keeps a significant portion by way of a ‘service fee’. Accordingly, Uber deducts its service fee from the rider’s payment and pays the balance to the driver. The service fee is calculated by reference to the time and distance component of the fare (generally 20 – 25% of the fare).
The NSW Chief Commissioner of State Revenue (Chief Commissioner) issued six payroll tax assessments to Uber for the 2015 to 2020 financial years, totalling $81,515,923 pursuant to the Payroll Tax Act 2007 (NSW) (Act), which is largely harmonised with the Victorian legislation.
The assessments were issued on the basis that the amounts collected by Uber from riders and then remitted to the drivers (after deduction of the service fee) constituted wages paid to each driver.
Contracts between the parties
Contract between Uber and drivers
The contract between Uber and the drivers stated that Uber did not provide transportation services, but that its business was to provide access to its ‘lead generation services’ rendered, via the apps, in consideration for payment of the service fee.
The contract required the drivers to exercise due care and skill when transporting riders, and acknowledged that in providing services to riders, the drivers had a legal relationship with the rider and not with Uber.
Contract between drivers and riders
The contract between the driver and a rider contained an acknowledgment that Uber does not provide transportation services, and that all such transportation is provided by independent third-party contractors (i.e. the drivers) who are not employed by Uber.
The contract also stated that Uber would facilitate receipt of the rider’s payment of the applicable charges on behalf of the driver, as the driver’s limited payment collection agent.
The legislation
Payroll tax is a state-based tax that is typically payable by employers and calculated on wages paid to employees. The regime operates by delineating between wages that are taxable or exempt. Wages are taxable if they are payable by an employer to an employee ‘for or in relation to the performance of work’ (section 35(1) of the Act).
The regime also extends to payments made to contractors who are engaged under a ‘relevant contract’. In that case, the business engaging the contractor is deemed to be an employer and liable for payroll tax calculated on the payments made to the contractor.
Due to the wide reach of the regime to contractors, several exemptions may exclude certain contractor arrangements from being captured. Relevantly, a contractor arrangement may be exempt if, under the contract:
- the provision of labour from the contractor is ancillary to the provision of materials and/or equipment;
- the contractor is engaged by the business to provide services for no more than 90 days during a financial year – i.e. short-term contractors are exempt;
- the Chief Commissioner is satisfied that the contractor ordinarily renders services of that kind to the public generally in the financial year; or
- the contractor engages two or more workers to provide the contracted services.
The applicability of any exclusion is to be determined on an annual basis in respect of each contractor to determine if an exemption applies.
First instance decision
At first instance, the Supreme Court held that the Act did not apply to deem Uber’s payments to drivers to be wages, and did not attract payroll tax. This was because the payments from Uber to the drivers were not ‘for or in relation to’ the work done by the drivers. Rather, it was the riders, and not Uber, who paid the drivers for the driving services performed for those riders under the parties’ contracts.
In these circumstances, Uber was held to be a ‘mere “payment collection agent”’. The primary judge noted some form of reciprocity between the money paid and the work done was required; in this case, there was no element of reciprocity between the driver and Uber, nor the rider and Uber, with respect to the money paid by the rider. Rather, the payment by Uber to the driver was made pursuant to an obligation to an account, and no more.
Court of Appeal decision
The Court unanimously allowed the Chief Commissioner’s appeal, resulting in a clear victory for revenue offices. The key conclusions of the Court are discussed below.
At the outset, the Court held the driver contracts were ‘relevant contracts’ under the Act. The driving service was not merely a means of assistance to Uber in some indirect way; rather, it generated a financial benefit for Uber in the form of a service fee, being the foundation of Uber’s ridesharing business. The Court held that the service of driving was plainly a service supplied to Uber.
The Court also stated the primary judge erred in finding that the Act required there to be some reciprocity between the money paid and the work done. The payments by Uber to drivers were payments related to the work performed by the drivers in transporting riders. The Act did not state that the services must have been supplied to the designated person, and the words ‘in relation to’ are meant to expand what was being encompassed.
The Court noted the payments were calculated by reference to the driving service (e.g. based on duration and time of trip), less Uber’s service fee, which was a percentage proportion of the fare. There was, thus, a direct relationship between the performance of work and what was payable by Uber to drivers, along with what Uber itself was entitled to retain.
No relevant exemption applied
Uber sought to rely on the exemption that the driving services were ancillary to the use of goods (i.e. the motor vehicles).
The Court stated it was inherent in the driving service that there would be the use of a vehicle — the driving service and the use of the vehicle were inseparable and practically intertwined. The driving service supplied was not ancillary to the use of the goods (i.e. the vehicle), as the driving service was not subsidiary, incidental or auxiliary to the use of the car.
The Court noted the provision of a passenger car was “quite different from the provision of a large truck”, in the latter case referring to the decision in ZG Operations Australia Pty Ltd v Jamsek 2 in which the High Court unanimously held that two truck drivers, Mr Jamsek and Mr Whitby, were independent contractors. During the course of judgment, Gageler and Gleeson JJ stated that where work “involves use of a substantial item of mechanical equipment for which the provider of the work is wholly responsible, the personal is overshadowed by the mechanical”, and this supports the “conventional view that owners of expensive equipment, such as [a truck], are independent contractors.” 3
Following Jamsek, the Court noted that the provision of a passenger car was quite different from a large truck, as cars are a common item of ownership, and are commonly driven by ordinary members of the community. The Court stated that when an Uber driver drives a rider in the driver’s car, the “personal is not overshadowed by the mechanical”. Accordingly, the exemption did not apply.
Implications of the Court of Appeal decision
The decision of the Court of Appeal has broad implications for businesses that heavily rely on independent contractors. It is important to note that whilst a court will have regard to the contractual arrangements between the parties, under the payroll tax provisions, a contract includes an “agreement, arrangement or undertaking, whether formal or informal and whether express or implied”. Effectively, a court can look beyond the terms of a particular contract to conclude that an arrangement is a ‘relevant contract’ and subject to the regime.
The decision will also have implications for businesses which operate in the gig economy, including other rideshare arrangements, couriers, food and grocery delivery services, and freelance professional services (e.g. such as web developers, writers, editors and photographers).
The decision will also have implications for businesses that utilise platforms which collect payments on behalf of service providers and then remit the balance to the service provider after the deduction of applicable service fees. Where the payment structure involves a flow of funds from a business to the service provider, there is a risk that these payments may be viewed as wages payable from the business.
On 29 August 2025, Uber filed a special leave application to the High Court. Whether the High Court will grant this leave application, given the unanimous decision of the Court of Appeal, remains to be seen.
It is critical now that businesses carefully review their contractor arrangements in view of the Uber decision. Despite Uber’s pending application for special leave to the High Court, it is likely that this decision will further embolden the revenue authorities, including the Victorian State Revenue Office, to undertake investigations and audits into contractor arrangements.
Contact us
We recommend that all businesses carefully review their payroll tax compliance and arrangements with contractors, in light of the Uber decision and ongoing investigations conducted by the SRO.
If you would like to review your payroll tax compliance, or are currently the subject of an SRO review or investigation, please contact Tamara Cardan on +61 3 9321 7862.
References
1. Chief Commissioner of State Revenue v Uber Australia Pty Ltd [2025] NSWCA 172.
2. ZG Operations Australia Pty Ltd v Jamsek (2022) 275 CLR 254 [2022] HCA 2 (Jamsek).
3. Jamsek at [88].
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